BackDeductions are available to offset tax on rent income
These include standard deduction of 30% of the taxable value
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I live and work in London, but have an apartment in Bengaluru, which I have let out. Will the rent be taxed?
—Adamya Arora
Rental income is subject to tax as “income from house property". Taxable value is the higher of amount reasonably expected from letting out of the property (i.e., higher of the municipal value or the fair rent of the property, restricted to the standard rent) or the actual rent received or receivable.
Deductions available against the taxable value include:
• Standard deduction of 30% of the taxable value,
• Municipal taxes paid to the local authority,
• Interest paid on a loan taken for construction, repairs, acquisition, or renewal of the property,
• Pre-construction period interest deduction (available as deduction in five instalments from the year subsequent to the year in which construction was completed).
A loss from house property can be set off from income under any other head of income, and if not totally consumed, can be carried forward for the next eight financial years.
Additionally, repayment of principal amount of loan is eligible for deduction under section 80C.
What is the tax treatment for income generated from selling a property for a Person of India Origin?
—Khyati
As per Indian tax laws, income earned from sale of property situated in India attracts capital gains tax. Depending on the period of holding of the property, tax will be considered as either long-term capital gain, or LTCG, (if period of holding is more than 36 months) or short-term capital gain, or STCG, (if period of holding is 36 months or less).
LTCG is subject to a tax rate of 20% (excluding surcharge and education cess) after indexation of cost. STCG is taxable at progressive rates of 10% to 30% (excluding surcharge and education cess). LTCG to the extent re-invested in India in specified bonds or a residential house (to be either purchased within two years or constructed within three years of transfer of property) are exempt. There are certain restrictions on the sale of new asset bought and the amount invested in bonds.
If due to some reason, the capital gains remain un-invested until the due date of filing of tax return in India (i.e., 31 July), an option is available to put the amount of capital gains in a Capital Gains Account Scheme with a bank (not later than the due date of filing your India tax return) and subsequently withdraw this amount for re-investment.
Queries and views at mintmoney@livemint.com
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